Japan, Vietnam cooperate on expanding local content

Expanding the value chain

Suttisak Wilanan, deputy managing director of Reed Tradex, said Vietnam has major potential for exporting electronic components. As of early 2015, Vietnam was the 12th largest electronics exporter in the world and third largest in ASEAN (Association of Southeast Asian Nations), and is expected to rise to higher rankings in the future. Vietnam earned more than US$40 billion from electronics exports in 2017, Suttisak Wilana said.

Luu Hoang Long, chairman of the Vietnam Electronics Industries Association (VEIA), said that as a center of Southeast Asia and a bridge linking Indochina to the world, Vietnam is becoming an attractive manufacturing center with a skilled workforce. Its labor costs are lower than Indonesia’s and half of Thailand’s.

Long added that mobile phone components and telephones became Vietnam’s biggest electronics exports in 2016, contributing to decreasing the country’s trade deficit. However, foreign direct investment (FDI) enterprises accounted for 99.8 percent or US$34.2 billion of Vietnam’s total mobile phone component and telephone exports in 2016.

According to Suttisak Wilanan, Vietnam’s electronics industry needs to increase productivity, grow the value chain, and increase local content. FDI businesses account for only one-third of all electronics businesses in Vietnam but represent 99.8 percent of the country’s total electronics export value and 80 percent of the domestic market share, said Suttisak Wilanan.

Increasing local content

Hironobu Kitagawa, chief representative of the Japan External Trade Organization (JETRO) in Hanoi, said the low local content rate of raw materials and spare parts is hindering Vietnam’s growth. He noted that the percentage of Japanese enterprises in Vietnam is only 34 percent, while in China it is 58 percent and in Thailand 57 percent. Therefore, businesses have to import from neighboring countries, such as Thailand and China, which leads to increased costs and potential risks, he said.

Hironobu Kitagawa said developing long-term relations with local partners is important to reduce cost, improve competitiveness and ensure a stable supply of component suppliers.

According to VIETRADE director, Bui Huy Son, the Ministry of Industry and Trade will focus on solutions to develop support industries and increase local content.